How costly are cartels?

Flavien Moreau and Ludovic Panon

No 1413, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: We study the cost of cartels in an oligopoly model with heterogeneous firms, endogenous markups, and collusion. Cartels can amplify or dampen misallocation, by charging supracompetitive markups and reallocating demand towards non-colluding firms. We find that standard competitive oligopoly models understate the cost of markups under reasonable values for the intensity of collusion and cartel composition configurations. Using French micro data, our baseline calibration suggests that breaking down cartels would increase aggregate productivity by 1.1% and welfare by 2%. These numbers shed light on the aggregate importance of collusion.

Keywords: competition; cartels; collusion; productivity; welfare; misallocation (search for similar items in EconPapers)
JEL-codes: D43 K21 L13 L41 O47 (search for similar items in EconPapers)
Date: 2023-06
New Economics Papers: this item is included in nep-com, nep-ind, nep-law and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_1413_23

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